UK families being hit hard, says Bank of England

LONDON — Less than a month ahead of the U.K. general election, the Bank of England published a gloomy report indicating British families’ finances are being squeezed that sent sterling tumbling.

The BoE’s latest quarterly inflation report, published Thursday, points to a stronger-than-expected squeeze in real incomes which would translate into decreased household spending.

The report also shows inflation continuing to climb above the central bank’s 2 percent target, and is expected to hit close to 3 percent by December, as the fall in the value of sterling has raised import prices and started to feed through to the real economy. Economic growth in the first quarter of this year was also weaker than expected, the BoE said.

Sterling fell sharply against the dollar after the report was released, losing half a cent to $1.288.

In a warning to the British government, the central bank said, “The outlook for U.K. growth will continue to be influenced by the response of households, companies and financial market participants to the prospect of the United Kingdom’s departure from the European Union, including their assumptions about the nature and timing of post-Brexit trading arrangements.”

The Bank of England also Thursday decided to leave interest rates and the levels of monetary stimulus untouched.

Its monetary policy committee voted seven to one to maintain the BoE’s benchmark rate at 0.25 percent, while unanimously backing the level of U.K. government bond purchases at £435 billion, and corporate bond buying at up to £10 billion.

Haahh

Jodocus4

Yet another irresponsible attempt by the BoE to talk Brexit down by spreading tales of fear and despondency. Will they ever learn? Spineless weasels! Traitors! Every last BoE economist!

Fire them all and hire Mr. Farage instead plus a shedload of freshly jobless UKIP members to write the forecasts.

Posted on 5/11/17 | 4:09 PM CEST

mladen

I am sure the brexiteers will soon appear to name it as nothing else but next scaremongering report.

Posted on 5/11/17 | 4:21 PM CEST

Stan

@Jodocus4

You’ve turned into a bit of a tw@t Jodocus. You talk exactly like those you criticise. Is it permanent or are you having a bad week?

Posted on 5/11/17 | 4:36 PM CEST

hhahah

stop talking down freedom of speech Jodocus we had to listen to your types for 40 years.

Posted on 5/11/17 | 5:07 PM CEST

mladen

University of Manchester to axe 171 staff amid Brexit concerns
University points to threats to future income as union chiefs criticise ‘short-term cuts that will cause long-term damage’ (Gardian)
A third Welsh university has announced huge job cuts (Wales online)

Posted on 5/11/17 | 5:12 PM CEST

Maverick

@Jodocus

?

Posted on 5/11/17 | 6:06 PM CEST

Joshua

mladen

Why do you care?

I finished a degree 3 years ago and throughout it there were cutbacks, modules and whole courses disappearing. This has been happening since tuition fees. It’s hard to tell what really is Brexit fears and if it is, why was it also happening when brexit was a distant blip on the horizon. Everything is blamed on Brexit at the moment, except all the good stuff of course. That doesn’t get a mention 😉

Posted on 5/11/17 | 6:06 PM CEST

jodocus4

@Maverick

Sorry … I’ll behave myself.

Posted on 5/11/17 | 6:17 PM CEST

Gareth Cooke

mladen

Yes university manchester one of Europe’s largest universities employs over 10000 staff and has largest student population in the EU there good little euro bot euro lander try to get your facts right and also it a global top 20 university in ranking unlike many EU from the EU empire

Posted on 5/11/17 | 6:23 PM CEST

Maverick

@Jodocus

🙂

I know you have had some recent ‘run ins’ with some relentless commenters but haven’t we all from both sides 🙂

You know as well as I do this article does mean an awful lot or even that unexpected. The only real surprise (hence the impact on sterling) was that due to rising inflation seeping through into the economy as a result of the devalued pound post referendum the money markets were expecting an interest rate hike – which the BoE disappointed them with.

Other than that there really is no material change except perhaps a ‘veiled threat’ things could dramatically if there is no smooth brexit…..but for most where is the surprise in that?

Posted on 5/11/17 | 6:37 PM CEST

Ben

Once again BOE talks down the pound and forcing the pound down. Anyone would think it was the Bank of EU.

Posted on 5/11/17 | 6:44 PM CEST

YellowSubmarine

The position in the EU – Gross domestic product in the 28-country EU will grow by 1.9% in both 2017 and 2018, the bloc estimated in its latest economic outlook, up from its February forecast of 1.8%.

EU officials said the eurozone’s recovery from the global financial crisis of 2007-08 faced threats, such as negotiations over Britain’s exit from the EU, China’s economic adjustment and potential protectionist measures from U.S. President Donald Trump.

It raised its GDP forecast for the 19-member eurozone to 1.7% this year from its previous forecast of 1.6% and maintained its estimate of 1.8% economic growth in 2018.

UK details – The Bank of England said they could raise their basic interest rate “by a somewhat greater extent” than markets are currently pricing in if its predictions of a continued pick-up in growth are accurate.

A more positive economic forecast in the longer term could see Sterling bounce back once markets drill down into the detail,” says Peter Ashton, Managing Director at Eiger FX.

A cut to 2017 growth forecasts to 1.9% from 2.0% previously. However, longer-term economic growth levels were revised higher which was seen as a positive

2018 growth is raised to 1.7%, up from 1.6% forecast previously, 2019 growth is raised to 1.8% from 1.7%.

So this is quite a positive development for Sterling longer-term and underpins that view that near-term weakness in the currency will likely eventually give way to a longer-term and more sustained recovery in the Pound.

The 2018 inflation forecast is lowered to 2.2% from 2.56% and 2019 inflation is lowered from 2.26% from 2.36% seen previously.

Rain Newton-Smith, CBI Chief Economist. There are survey indicators pointing to stronger growth than official data.

Hollingsworth at Capital Economics – If we are right in thinking that the economy will maintain a solid pace next year then we think that the Committee should be in the position to take the first steps in “normalising” monetary policy around Q2 2018.

BoE press conference –

Posted on 5/11/17 | 6:47 PM CEST

Alexandre Mericourt

Stop brexit !

Posted on 5/11/17 | 8:00 PM CEST

den

@jodocus4

I thought your name had been hijacked 😀

Posted on 5/11/17 | 8:40 PM CEST

Milton38

Years ago I had a friend, project director for a large international company, who during a board meeting got so fed up that he stood up and told them “I have had enough of your sh**” and walked out.
Gave up a good job and good pay to do what he liked.
That is the way I see Brexit. UK wasn’t happy so they opted out. Good for them but then don’t expect to keep the salary and perks. And Mrs May be honest, tell them that is going to be the way.

Posted on 5/11/17 | 8:43 PM CEST

Stan

Milton38

So he didn’t have to finish off all the projects he was working on free of charge after he left? Hmm interesting… 😉

Posted on 5/11/17 | 9:01 PM CEST

Maverick

@Milton38

And now he is happier & in a better job? 😉

Posted on 5/11/17 | 10:08 PM CEST

Institute of fiscal studies spy

Total crap, UK families are now feeling the effects of having wages compressed for the last ten years, so the likes of Tony Blair can find a cheap plumber or factory worker for his elite manufacturing buddies.